A Background to Our Understanding of Child Poverty in New Zealand

Anglican Chaplaincy Seminar, VUW, 8 August, 2012

I have been asked to talk about the history of child poverty. Social scientist don’t have much of a systematic account before the 1970s, although there is plenty of anecdote. It was the 1972 Royal Commission on Social Security which precipitated the upwelling in research and thinking about children, together with the first useful household income surveys. What the statistics suggested was that around one in four children were below the poverty line, a proportion not very different from today’s, which means we have not made much progress in forty odd years. That makes you think.

Of course the proportion is sensitive to the exact poverty line. There appears to be a general agreement that in an affluent country like New Zealand that we use a measure relative to the nation’s living standard as a whole, not an absolute standard. It is not a matter of being just able to sustain life – no matter how miserable that life is. There is a general acceptance of the principle, if not the practice, that the standard of living has to be sufficient – in the words of the 1972 Royal Commission on Social Security – to enable the individual to participate in and belong to their society.

The early 1970s research was not only important in quantifying the level of poverty in New Zealand – much of the subsequent research has been refining the central idea, although there is another strand, which also began then, which uses measures of material wellbeing, but which still does not connect to an income measure – the main policy instrument that we have for relieving poverty.

Perhaps more important than the numbers, was the realisation that poverty was not only about beneficiaries – a wildly held anecdotal belief at the time. What the research showed was that poverty was mainly to do with children. The last time anyone calculated it – admittedly before the working for families package had cut in – the research found that over 80 percent of New Zealand’s poor were children, their parents and others living in their households.

Moreover it found that child poverty was much more widespread than today’s conventional image that the typical poor household is a brown, a solo-parent beneficiary, in rental accommodation. In fact:

there are more pakeha than Maori and Pasifika who are poor;

there are more in two-adult families than solo-parent families who are poor;

there are more dependent on wages than benefits who are poor;

there are more in their own homes (typically with a mortgage) than in rental accommodation who are poor.

What has confused people is that while there are a higher proportion who are poor in the minority categories, there are so many more people in the majority categories their numbers swamp the lower proportions.

It is children who generate the majority of poverty – not being brown, or solo, or on the benefit, or a tenant (although there are some people in these circumstances who are in pretty cruddy situations).

Very typically for New Zealand social rhetoric we have been happier to list the number of poor – perhaps adding anecdotes – than to analyse what is going on. As a result we often end up with inefficient policies.

It would be easy, for instance, to jump to the conclusion that what we need is higher wages. That has been a long held belief, first codified in 1907 with the “Harvester” decision of the Australian Arbitration Court, which said that the wage level had to be set to provide an adequate standard of living for a worker, his wife and two children. But if it was adequate for that family it would be generous for a single man and inadequate for a family of four and more children. It is not possible to eliminate child poverty by simply relying on wages.

So there is market failure. I suppose it is obvious but let us go through the economic analysis. Essentially children are an investment in the future. But it is not an investment that you can borrow against – student loans aside – so the family has to fund the investment from its own resources. Typically the parents do not even get a financial return in the future. The beneficiaries are directly their children, and indirectly older generations as a whole because when they are adult the children pay the taxes which sustain the New Zealand Superannuation and the health care of the elderly.

If families under-invest in their children – and when they are seriously income constrained that is inevitable – the children will suffer. But so will society as a whole. Not only will the retired suffer when it becomes the younger generation’s turn to fund them, but the under-invested children will cause more government spending – such as on law and order and health care – and other government spending – on education – will be inefficient.

The logic to a civilised nation is that the government should contribute to the investment in its children to compensate for the under-investment caused by relying solely on wages (market incomes). We do this when we provide free education and health care – although each may be insufficient in quantity while user-pays has been steadily creeping in. However, often the performance on these and similar public sectors are deeply dependent on adequate investment by the family and that means some top up of income by the state.

We already do this via social security benefits such as the domestic purposes benefit, family support and working for families. There are two issues: is the available funding properly allocated, and is it enough?

I focus on the second question. The poverty research suggests that family incomes are too low, limiting the ability of many children to be able to grow up as a part of society as a whole. Additionally there is fragmentary social and medical research which suggests this leads to problems among the children, although in some cases this can be best remedied by more spending on health and education, say.

What I have just described is the analytic framework which was developed in the 1970s and which underpins my of the critique of the government’s approach to children’s income maintenance. It did not particularly influence the Rebstock committee because it had another agenda.

But it is a very old framework. Forty years after the Royal Commission on Social Security there has been social change, and some elements of that change have yet to be incorporated into the framework. Rather it pretends as if nothing has happened. Practical New Zealanders are notoriously slaves of defunct economists.

Among the major relevant social changes are (in alphabetical order):

an increasing proportion of children are in solo or blended families;

changes in the housing market;

more migration so not all the benefits from children accrue to where they grew up in;

increasing affluence, diversity and income inequality;

rising charges for schooling;

the rise of two income households;

unemployment is higher.

Each of these poses a challenge to the analytic framework I have just described. As one of the people who consolidated it all those years ago – although I readily acknowledge it reflects a much older social philosophy in New Zealand and elsewhere – I am proud that the framework has stood the test of all this time, eager to get onto developing it for the changes since then, impatient with those who are stuck on an outdated one, but – most of all – greatly puzzled why it had so little impact on public policy.